Sunday, April 29, 2012

GDP came out at 2.2 percent for the quarter. The GDP deflator came in at 1.5 percent.

What does that mean?

GDP is the value of all goods and services produced by the economy. 2.2 percent means the economy expanded by that amount. New goods and services were being offered and bought. 2.2 percent more than last year for the quarter.

The GDP deflator measures how much of the expansion is just due to INFLATION and then removes that amount.

According to the government inflation grew (on an annually adjusted basis) at 1.5 percent.

Only, the funny thing is, let's just say you live in an alternate world where the cost of living is rising at a much higher rate. Let's just say at a 2.5 percent rate.

Then GDP was actually very close to ZERO.

But gosh, let's say you live in the world I live in. Where the cost of living is soaring.

Let's say you live in that world. Let's say real inflation as gauged by John Williams at Shadowstats as measured with the same metrics used in 1975 - That real inflation is running at 9 PERCENT a year.

Then the ECONOMY SHRUNK - YES GDP SHRUNK at an alarming rate. At a depression rate. Yes, then the economy is shrinking at a rate the explains all those unemployed, underemployed people out there.

Wow - but is that really possible? Hey why is the stock market skyrocketing then? Why are corporate profits soaring?

Could it be they use the same false metrics as the government. Is Bernie Madoff right? Is our entire economy a Ponzie scheme?

Wednesday, April 25, 2012

To understand when gold will continue its bull march you have to understand how the US economy works.

Here's how:

A) The Fed prints money and gives it to the banks that own the Fed.

B) The banks gamble the money in the risk markets - but mostly the stock market.

C) Corporations announce terrific earnings - (excluding: "one time" losses from poor business decisions, the cost of new plants and equipment, and the all the massive debt and debt service they've built up over the last 40 years)

D) As long as the stock market doesn't tank the game continues and the economy appears to be holding up.

During this entire scenario the rise in the gold price is managed. Over time gold appreciates slowly as the value of printed dollars drops - with long periods of consolidation.

THEN:

E) A "shock" hits the economy. It can be anything. A terrible trade - an act of terrorism - a natural disaster - a foreign crisis - a string of surprisingly horrible data - an implosion in a derivatives market - a massive fraud is uncovered - a policy error - make up your own shock.

Tuesday, April 24, 2012

But let's just say you get it. You get that gold is not an investment. You get that gold is not a trade. You get that gold is Money. It has always been money. It was money long before the dollar had been conceived. It will be money when the dollar is a distant fading memory. (which may be soon.)

And you get that the Value of gold as money is increasing every second, just as the value of the dollar is decreasing every second (Irrespective of meaningless metrics like the "dollar index" etc.)

Not everyone gets that. But let's say you do. But it only just dawned on you recently and now you wonder: What to do about it?

Step one. Buy real gold. Buy bullion. Buy gold coins from central government mints. Buy steadily, and store it in a safety deposit box or a safe. Buy from huge volume dealers. Call up your local comex repository like MTB, or go online to a retail giant like Apmex. I get nothing for recommending these sellers.

Step two. Stay away from paper gold. Gold stocks are paper. They mayrepresent ounces in the ground, but they are not ounces in the ground. Futures are paper. They do not settle. They are a trading vehicle only. Tracking stocks like GLD are stocks. They are liquid - right now. But it's not possible to know if they hold gold in their vaults. And even if they do, it's not your gold.

Step three. If and only if you have a very strong knowledge of world history:buy rare numismatic goldart. This does not include US gold. That market is mature, because many Americans do know US history and have bout the hell out of that market. But if you know European, Medieval, Byzantine, Ancient History, you can understand which gold coins are of immense historical value, and you can find them at auction or on line. They constitute GOLD ART and they are very very cheap compared to all other forms of art.

Step four: Do not worry or even monitor the Paper Price of Gold as regulated buy the highly manipulated futures market. It is irrelevant since you are not trading gold. Do not pay any attention to "Historical Metrics" and "ratios." The gold-silver ratio, the gold to SP ratio, the gold-gold stock ratio, the gold-anything ratio is meaningless.

Addendum: If you do not "Get Gold" but are wondering about it: study hard. Do you own work. Read the history of the world economy. Read the history of money. Because if you are borrowing investment ideas from others you will be the proverbial "weak hands" that buy at the top and bail out at the bottom.

Saturday, April 21, 2012

Now, can you imagine a country where those those seeking to fix this problem of massive debt want to embrace - and repeat - the policies of the administration that caused this massive debt?

Welcome to the United States of Credit-topia: invented by Ronald Reagan - and his team of crack borrow-and-spend "supply side" debtors. (what they "supplied" was debt.)

Fact: During the Reagan years US total credit grew at fantastic clip of 10 percent a year - far more than any other period since World War 2.

Fact: During Reagan's 8 years as Emperor of Credit-topia government debt increased by nearly 200 percent - from about half a billion dollars to 2 Trillion dollars

Now we have the Democrats who don't really seem at all concerned by the problems of Credit-topia, and the Republicans who seek to fix the problems by embracing the cause of the problems and repeating those policies.

How can We as a Nation be so inconceivably stupid?

The answer isn't important.

The fact that the situation is obviously going to get much worse before it gets better is important.

Friday, April 20, 2012

What do you do with an economy built on 53 trillion dollars of debt that needs to be serviced. (And another 78 trillion of unfunded liabilities (debt) that has been contracted to be funded but could easily by defaulted upon)

Lower Taxes. Obviously this will provide even less revenue - (notwithstanding Reagan apologists who have no understanding of the difference between causation and correlation)

Monetize the Debt - we are. Massively. But this is a dangerous game as the dollars used to pay down existing debt become less and less valuable which leads to the famous Liquidity Trap and eventually hyper-inflation

GROW THE ECONOMY - This is the War Cry of the Truly Brain Dead who don't understand that in acredit-topia this means taking on ENORMOUS NEW DEBT. This is because in Credit-topia Investment comes from CREDIT and not SAVINGS. Our saving rate is not zero - it's negative.

Sorry, but taking on huge debt does not Lower the Debt. I know this is difficult to understand: but More debt actually means more debt.

So gee - where does that leave us?

Sounds like a tough one, right?

Right.

But wait, there is a solution - and nobody will like it - because everybody is still thinking about capitalism and socialism in stead of Credit-topia.

The solution is for the Government to create jobs and new investment by massively subsidizing new technologies.

But that's socialism! Only to the tiny brained. The banks are massively subsidized. The insurance companies are massively subsidized. The oil industry is massively subsidized. The auto industry is massively subsidized. The entire agriculture industry is massively subsidized. Welcome to Credit-topia.

The Government must keep renewing the subsidy game with new and better technologies. But it won't because nobody in government - or the rest of the country - is ready to admit that Capitalism and Socialism are dead.

But wait - won't that create more new debt? Yes - of course - this is credit -topia. Debt fuels everything. But at least this debt would be marginally productive and could produce a reasonable return. Enough to postpone the implosion a good long while.

Welcome to Credit-topia. A place where everybody borrows and spends and nobody stops to think of what that might mean.

Thursday, April 19, 2012

Well, right now all the politicians in Washington and the political pundits on the airwaves are spending all their time arguing over economic systems that ceased to exist decades ago: Capitalism and Socialism.

Those tiny brained leaders and opinion makers are exhausting themselves spluttering and pontificating about long-defunct systems.

The whole world is a Credit-topia now. The United States of America - Europe - China: One Big Credit-topia - based on the principal of the Creation Of Credit to fuel Consumption.

In all these countries, as in all Credit-topias, the Central Bank creates the money and the Governments allocate it and indulge in massive deficit spending programs. All industries are subsidized. The entire banking system is subsidized. All major banks and insurance companies are Too Big Too Fail. The financial industry is a subsidized casino.

There's nothing to argue about here. There is no capitalism. There hasn't been for decades. There's nothing to do to "FIX" it. That battle should have been had 50 years ago.

Wednesday, April 18, 2012

Back in 1980 when Ronald Reagan introduced the world to Morning In Credit-topia, it sure seemed like a good idea. All you had to do was:

A) get the Fed to keep real rates negative for ever,

B) reduce the reserve requirements at the banks to nothing.

C) you just had to kill all those nasty regulations that kept the banks from gambling 10, 20, 80 times their non existent reserve requirements in the RISK MARKETS.

Morning in Credit Topia. Easy as ABC.

And it was. America was turned into a casino. The wealthy - those closest to the Banks - became stinking rich, and even those in the middle class who were willing to take enormous risks with borrowed money could become fabulously wealthy - WITHOUT WORKING.

ASWESOME. Morning in Credit topia. Even now pundits on Fox news and CNBC tirelessly long for those good old days of free money and no work.

So - where are we today, 40 years later? Credit Topia 2012 style.

Well now the Credit Market is 50 TRILLION dollars larger. Now the economy has to grow at 2 percent just to SERVICE ALL THAT DEBT.

And Now the Credit market must grow at 4 percent for the economy to grow at 2 percent as all economic growth is predicated on Credit Growth.

And now the middle class has lost all that risk money in the housing bubble crash, and the internet bubble crash, and they are already loaded up with 12 Trillion dollars of debt.

The corporate sector is carrying another 12 Trillion dollars of debt.

And the banks are loaded with 16 Trillion dollars of debt - and 600 Trillion dollars of notional value Debt Derivatives.

Gee, tough to tap them for the 2 Trillion of Fresh Debt needed to create 1 Trillion of new GDP needed this year to service all that debt.

Guess the Government will have to run a deficit of 2 Trillion Dollars

OH - Yeah, the Politicians finally have decided - after 40 years - they don't like that idea. It's not fiscally responsible.

Tuesday, April 17, 2012

Capitalism is investment in plants, business equipment and labor financed by Saved Money.

40 years ago, the United States left this model behind under the leadership of the great Anti-Capitalist President, Ronald Reagan.

We then underwent the great transformation to a Credit-Topia. Credit-topia is an economy based on Consumption financed through Debt.

During this period the Total Credit Market in the US expanded by 50 TRILLION DOLARS. Now 70-75 percent of our economy is based on Personal Consumption. And total debt is 400 percent of GDP.

In a capitalist system the remedy for excessive debt is a period of AUSTERITY. This is now being debated fervently in Washington.

In a Credit-topia, however, Austerity is the recipe for a DEPRESSION OF MASSIVE PROPORTIONS, as EVER MORE CREDIT is needed to simply SERVICE THE DEBT.

In capitalism, the banks efficiently distribute money to be invested in capital.

In Credit-Topia, the banks generate Credit/Debt to fund consumption. Capital is simply a book-keeping trick managed at the banks.

The moment we implement any sort of Austerity Program, the Banks will collapse as they need infinite credit creation to keep servicing their mounting debt. (Unless the Austerity is simply a gimmick aimed at the working poor who have nothing to do with the banks,)

Monday, April 16, 2012

Obama Bid to End Too-Big-to Fail Undercut as Banks Grow

By
David J. Lynch
-
Apr 16, 2012 12:00 AM ET

Two years after President Barack Obama vowed to eliminate the danger of financial institutions
becoming “too big to fail,” the nation’s largest banks are
bigger than they were before the credit crisis.

HA HA HA - SO WHAT'S THE JOKE HERE?

The joke is that over the last 40 years economy has grown by expanding the Total Credit Market by 50 TRILLION DOLLARS.

This has been accomplished precisely by making banks TOO BIG TO FAIL. If credit contracts, IE if the size of the banks CONTRACTS, the economy SHRINKS.

If the ECONOMY SHRINKS while trying to service 50 TRILLION DOLLARS OF DEBT, the ECONOMY COLLAPSES.

THAT SIMPLE. AS FAR AS ALL POLITICIANS ARE CONCERNED THE BANKS WILL CONTINUE TO GROW INDEFINITELY, OTHERWISE the ECONOMY COLLAPSES. AND THEY"RE RIGHT.

CREDIT/DEBT/BANK SIZE MUST KEEP EXPANDING AT THIS POINT. ONLY CREDIT/DEBT IS ALREADY SO GREAT AND OF SUCH POOR QUALITY IT CAN NO LONGER BE SERVICED.

Friday, April 13, 2012

Above is a lovely example of the strength and power of theGold Bull:it is also a particularly lovely example of theGold Lamb, a staple of the coinage of the 14th Century.

At the time Europe was wracked and ravaged by the 100 years war - as well a the bubonic plague. Gold was everywhere in short supply, though still used, as it had been since about 600 BCE as money. This coin would have been minted most probably to pay officers assembling armies of mercenaries, or perhaps in exchange for luxury goods like fine silks for some Nobleman's castle. The symbol of the Lamb of Christ, of course implied that those using this token of worldly power were servants of God.

Yesterday, somebody purchased this coin at an auction in Brussels for about $9000. Three years ago it could have been had easily for $3000. This auction had many unusually well preserved gold specimens from this era. They all brought similar prices.

Three years ago bullion gold was selling for about $1000. Now it's selling for about $1700. Meanwhile top numismatic specimens of historical gold have tripled.

What does this mean?

No, I'm not encouraging people to run out and buy numismatic gold. But I have noticed that over the last ten years, numismaticgold- like Old Master Art, Certified Diamonds, classic cars, historical documents, rare books etc etc have served as an leading indicator for the Bullion price of Gold.

Why? Because the wealthy in the world are now so wealthy that they're desperately seeking to preserve - rather than grow - that wealth by diversifying out of paper money into REAL THINGS. These things serve as a wonderful store of wealth. Just as REAL MONEY: GOLD serves the same purpose.

Interesting though, the more the wealthy - (the top 1 percent of which holds 70 percent of the world's financial assets) seeks to preserve wealth through Real Things - the faster these Real Things appreciate, and the wealthier the wealthy become.

As the Original Lamb of God once noted: "Whoever has will be given , and he shall have an abundance. Whoever does not have, even that which he has shall be taken from him." Mat, 13:12

The fact that this must be explained to those Leading the Country is exactly why nothing is going to get better soon.

2) How about this one: The top 1 percent pays 40 percent of the Taxes. That's too much!

You hear this one from tiny brained people continuously. But Percentages by themselves are meaningless. Everywhere and Always. The top 1 percent owns 70 percent of the financial assets. So for them to pay 40 percent of the taxes is actually way too low.

3) Here's a Big One from the Keynesians like Paul Krugman. "Flooding the economy with printed money helped during the collapse of 2008. So even more printed money should help even more now as the economy slows again."

Again, wrong on so many levels. First, this is only 2012. We have NO IDEA how much long term damage the Money Flood of 2008 will cause. Can't you see that? We propped up Moribund Banks. They're still propped up. Does that mean we're any healthier?

Second, this is the same Moronic Logic used by Reagan Tax Cut Crowd. IE; What worked in one specific case should work in every case, no matter how dissimilar.

How stupid can you get - just on the level of sheer logic? What has happened to us as a culture that we can't think?

WHEN YOU DEPOSIT MONEY AT CHASE THEY USE IT TO GAMBLE IN THE DERIVATIVES MARKETS (Gosh, who'd have thought?):

JPMorgan Trader Iksil Fuels Prop-Trading Debate With Bets

JPMorgan Chase & Co. (JPM) trader Bruno Iksil’s outsized bets in credit derivatives are drawing
attention to a little-known division that invests the company’s
reserves and fueling a debate over whether banks are taking
excessive risks with federally insured and subsidized money. (DEPOSITS! And money borrowed from the Fed at zero percent!)
Iksil’s influence in the market has spurred some
counterparts to dub him Voldemort, after the Harry Potter
villain. He works in London in the bank’s chief investment
office, which has assembled traders from across Wall Street to
its staff of 400 who help oversee $350 billion in investments.
While the firm describes the unit’s main task as hedging risks
and investing excess cash, four hedge-fund managers and dealers
say the trades are big enough to move indexes and resemble
proprietary bets, or wagers made with the bank’s own money. (NAH! COULDN'T BE!)

This year, Iksil has been betting on an index of 121
companies.
The net amount of wagers on the index, which is tied to the
creditworthiness of companies such as Wal-Mart Stores Inc. and
now-junk-rated bond insurer MBIA Insurance Corp.,soared to
almost $145 billion at the end of March from $90 billion three
months earlier, according to DTCC, which runs a central registry
for credit-default swaps and reports weekly aggregate volumes.

Widening Gaps

Iksil may have built a position totaling as much as $100
billion in contracts in one index, (WHILE, GEE, JPM'S NET PROFITS WERE 14 BILLION LAST YEAR - EXCLUDING MASSIVE OFF BALANCE SHEET LIABILITIES) according to the market
participants, who said they based their estimates on the trades
and price movements they witnessed as well as their
understanding of the size and structure of the markets.

Iksil’s trades have been so large that they’re widening
gaps between the relative value of the indexes and the average
price of contracts tied to companies in those indexes, according
to the market participants. That has frustrated some hedge funds
that had bet the gaps would close, the people said.

Joe Evangelisti, a spokesman for New York-based JPMorgan,
declined to comment on Iksil’s specific transactions, and Iksil
didn’t respond to phone messages and e-mails seeking comment.

(But he laughed with his trading buddies that if the bets do go south, the taxpayers can damned will pick up the tab. And he'll sure as hell keep his trading bonus either way.)

Saturday, April 7, 2012

Ben Bernanke, Head Trader at the US FED, May be forced to talk up more QE, as Employment Picture Sours.

This will sour his bluff that the US economy is mending: a bluff he so badly needs to make to keep widows, orphans, pensioners and small Hedge funds in the market so that the big banks can continue to fleece them of all their hard earned money.

Think I'm exaggerating? Check out these headlines. And Remember: JP Morgan is the majority stock holder in the Fed. And the major banks get all their trading money through "Loans" at zero percent directly from the FED:

How Speed Traders at the Major Banks Are Changing Wall Street

CBSNews

It may surprise you to learn that most of the stock trades in the U.S.
are no longer being made by human beings, but by robot computers capable
of buying and selling thousands of different securities in the time it
takes you to blink an eye.

These supercomputers - which actually
decide which stocks to buy and sell - are operating on highly secret
instructions programmed into them by math wizards who may or may not
know anything about the value of the companies that are being traded.

It's
known as "high frequency trading," a phenomenon that's swept over much
of Wall Street in the past few years and played a supporting role in the
mini market crash last spring that saw the Dow Jones Industrial Average
plunge 600 points in 15 minutes.

The Fed’s QE Traders, Buying Bonds by the Billions

Fred R. Conrad/The New York Times

Blake Gwinn, left, and James White in the Operations Room.

Josh Frost, who oversees the buying of billions in Treasury debt by the New York Fed.

In a spare, government-issue office in Lower Manhattan, behind a bank of
cubicles and a scruffy copy machine, Josh Frost and a band of market
specialists are making the Fed’s ultimate Wall Street trade.

Fed buys $2.085 billion in Treasuries

NEW YORK |
Fri Mar 30, 2012 11:50am EDT

(Reuters) - The Federal Reserve on
Friday bought $2.085 billion in Treasuries with maturities ranging from
February 15, 2036 to February 15, 2042.

JPMorgan Trader’s Positions Said to Distort Credit Indexes

A JPMorgan Chase & Co. (JPM) trader of
derivatives linked to the financial health of corporations has
amassed positions so large that he’s driving price moves in the
$10 trillion market, traders outside the firm said.

Market-manipulation mutterings intensify

Gold bug Russell adds voice to idea of Wall Street-Washington plot

|Peter Brimelow, MarketWatch

NEW YORK (MarketWatch) — Manipulation mutterings are spreading, and that’s ominous.
Recently,
I noted that longtime gold bug Richard Russell of Dow Theory Letters
finally converted to the thesis that gold’s price is subject to
manipulation by a Wall Street-Washington alliance. See April 25 column on Russell and the gold-manipulation thesis.

Gold Market Manipulation: JP Morgan
insider makes shocking revelation

Gold Investment - 26 March
2012

A JP Morgan employee, who has
chosen to remain anonymous, has recently revealed damning insider information about JP Morgan’s
practices in a comment made at the website of the CFTC (Commodity Futures Trading Commission) in the United
States.

Thursday, April 5, 2012

Ben Bernanke, Trader-in-Chief for the US Banking Cartel, is pulling a very tricky bluff.

You see, his Trading Outfit: The Federal Reserve Bank, has a dual trading mandate:

A) He has to keep printing unlimited dollars to feed to his hungry member banks, so that they can keep gambling and pulling in huge salaries and trading bonuses.

B) He has to convince the US public that the economy is mending so that they keep pouring their hard earned dollars back into the economy, so the bankers have healthy markets in which to gamble..

A is easy. He has a printing press. But to justify running it full throttle, he needs an ongoing crisis.

But to fulfill mandate B he has to convince the public the crisis is ending. How do you pull off mandate A and B together? Not so easy.

In Europe, the central bank's Trader-In-Chief only has to fulfill a single mandate: keep the banks afloat. There is no mandate B. They're willing to go through a recession, or even a depression, figuring it will come anyway, so why not try to manage the economy realistically. After all, their bankers don't need those bonuses. They're happy with those big salaries.

But here in the US, it's unthinkable that bankers should forgo one cent of their bonuses, even though they've managed their banks into bankruptcy. This is why in 2008, completely bankrupt institutions like AIG and Goldman Sachs not only survived with enormous Federal Reserve printed money infusions, but they got to keep all their bonus money.

But that was easy. It was a crisis. So everything is permissible.

But now, Big Ben, Trader-in-Chief has to pull off the most amazing bluff of his career. He has to convince the public that the economy is mending, so they keep spending, while keeping the printing presses roaring so that the banks can keep trading the markets, and filling their pockets, so they don't miss any bonus money.

So how's he doing it? Well, through talk. He's got to bluff. He can release "Fed Minutes" where they talk up the economy, he goes on speaking tours. He has an army of schills that light up the airwaves talking up the economy. But it's a dangerous bluff, because everybody knows the second Big Ben stops printing, the economy collapses.

So all the while, he has to make sure everybody understands that the second "Another Crisis" appears, he'll be there with all that fresh printed money. At the same time he has to pretend the economy can survive without it. It's a dangerous bluff.

Imagine you could go into any poker game in the world armed with unlimited chips. I bet you think you could win big. But here's the trick: how do you keep other players coming into the game to gamble against you, knowing you have unlimited chips?

Not so easy right? You'd have to convince the other gamblers that even though you have all those chips, you'll only use them if the entire game is in danger of collapsing. You promise not to use them just to rape the game.

Personally, I wouldn't believe a guy who told me that. But so far, a lot of people are willing to buy in. So far, Big Ben, Trader-in-Chief, seems to be pulling it off. But it's a very dangerous bluff.

Monday, April 2, 2012

Jim Paulsen - the TV Schill (Not John Paulsen the hedge fund manager) - is banging his sell gold - buy stocks drum - just as he's been doing the last 10 years. And he's not alone. This time he's sure he's right. His reasons: Gold is over-owned by "the masses" and sentiment is off the charts.

Let's look at these claims:

Of
the entire universe of financial assets in the whole world, only
between 0.2% to 0.8% (depending on whose estimates one believes) are
currently represented by investments in gold and gold-related assets.
That's just slightly above 'nothing'.

And to get to 0.2 percent, I'm sure you have to count in the broken earrings and bracelet that fell through the cracks when "the masses" carted their gold down to Cash-for-gold, so that they could get more dollars to trade for gas, fritos, pepsi, and lottery tickets.

As for sentiment, according to both Sentiment trader and Hulbert's gold is at a decade low, while stocks and Housing are near a decade high:

Paulsen, maybe the dumbest man on TV - (and that's really saying something as you have to compete with the likes of Snooki and "the Situation" from Jersey Shore) - also tries to value gold in stock terms, treasury terms, housing terms - and finding that gold is in a convincing 10 years bull market in all of these, the mentally challenged tv personality concludes that gold must be too expensive.

Of course, Picasso's have continued to rise in comparison to vintage Hot Wheels and Barbies over the last ten years too. Paulsen also advises on selling your Picasso to buy dolls and toy cars.

Sunday, April 1, 2012

Not a day goes by when some genius with their own TV or Radio program, like Rid Edelman, or Dave Ramsay, or some TV personality masquerading as a trader, like Jim Paulsen or Dan Dicker etc etc comes out to ridicule gold as a viable investment. Even Warren Buffet, a man who sells stock for a living, is not shy about ridiculing gold.

Their argument is always that "over the long run" stocks outperform.

The chart above shows the last 10 years of stocks priced in gold. It speaks for itself.

Now, I'm sure you can find 10 other years in the history of the world where stocks did outperform. That exercise will tell you a lot about those particular 10 years. If you have lots of time on your hands with nothing else to do, go research it. You'll probably learn a lot about 1955-1965, for example.

On the other hand, if you're more interested in how to invest in the current time period, the chart above that represents the current time period is probably more useful.

Look at the chart. Ask yourself: what has caused this chart to look like it does?